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Gene Therapy Price: Commercial Viability And Moral Dilemma

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On May 24, 2019, Novartis announced the US-FDA approval of ‘the first and only gene therapy’ – Zolgensma, for a type of Spinal Muscular Atrophy (SMA), a lifesaving treatment for infants of less than 2 years of age. This unique drug halts disease progression with a single, one-time intravenous (IV) infusion.

On value offerings of Zolgensma,the Novartis CEO said: “The approval of Zolgensma is a testament to the transformational impact gene therapies can have in reimagining the treatment of life-threatening genetic diseases like spinal muscular atrophy. We believe Zolgensma could create a lifetime of possibilities for the children and families impacted by this devastating condition.”

Unquestionably, this development in medical science is indeed commendable. But, the jaw-dropping price tag – USD 2.125 millionattached to this product, has brought back gene therapy at the center stage of the incensed debate on access and affordability of such treatment for a vast majority of the population, across the world. Besides, two important issues related to gene therapy need to be effectively resolved – long-term commercial viability and the ‘moral dilemma’ that its market launch would prompt. And both are interconnected and also associated with the pricing rationale of such therapies.

I am terming  the second factor as a ‘moral dilemma’ rather than an ‘ethical dilemma’ because, “ethics is a more individual assessment of values as relatively good or bad, while morality is a more intersubjective community assessment of what is good, right or just for all.”In this article, I shall deliberate on these two interrelated issues. But, before delving into it, let me recapitulate in simple terms, what exactly is ‘Gene Therapy.’

What exactly is ‘Gene Therapy?’

According to US-FDA, human gene therapy seeks to modify or manipulate the expression of a gene or to alter the biological properties of living cells for therapeutic use.

Gene therapy is a technique that modifies a person’s genes to treat or cure disease. Gene therapies can work by several mechanisms:

  • Replacing a disease-causing gene with a healthy copy of the gene
  • Inactivating a disease-causing gene that is not functioning properly
  • Introducing a new or modified gene into the body to help treat a disease

Gene therapy products are now being studied to treat diseases including cancer, genetic diseases, and also infectious diseases.

Gene therapy price has been going higher than highest, thus far:

‘At USD 2.1 million, newly approved Novartis gene therapy will be world’s most expensive drug,’ says another report of May 24, 2019.It is noteworthy that Zolgensma price has been kept higher than the highest priced drug before this product came. If his trend continues, the future gene therapy cost is likely to exceed even Zolgensma price, the implication of which for patients who will need such treatment to save life or manage the disease, will be huge.

Intriguingly, the high treatment cost for a rare ailment like, SMA - a degenerative disorder that usually kills an infant within two years, is not limited to just gene therapy.  According to the April 04, 2019 article titled, ‘Biogen SMA drug price, Novartis estimates for its treatment far too high – U.S. group’ of Reuters, the price of another drug for SMA – Biogen’s Spinraza, which is not a gene therapy, is also very high. Its list price is USD 750,000 for the initial year and USD 375,000 annually. As reported, ‘Spinraza, an important growth driver for Biogen, took in USD 1.7 billion in 2018 sales.’

What should have been the actual prices of these drugs?

Interestingly, to determine the value of these drugs, the nonprofit Institute for Clinical and Economic Review (ICER) ‘used a measure known as “quality-adjusted life year” (QALY), in which each year of healthy or near-healthy life resulting from the treatment is worth USD 100,000 to USD 150,000.

Using the QALY benchmark, ICER, reportedly, said Spinraza should cost between USD 72,000 and USD 130,000 for the first year of treatment, and cost USD 36,000 to USD 65,000 per year after that, for infants not yet showing symptoms of the disease.

Further, with an alternative benchmark, known as life-year gained (LYG) based on the additional number of years a person lives due to a treatment, Spinraza is, reportedly, worth USD 83,000 to USD 145,000 in year one, and USD 41,000 to USD 72,000 annually thereafter, as ICER determined.

Zolgensma, on the other hand, would, reportedly, be worth USD 310,000 to USD 900,000 for Type 1 SMA patients based on the QALY assessment, and USD 710,000 to USD 1.5 million using the LYG calculation, ICER said.

Notwithstanding, whether one takes the QALY assessment or LYG based price of Zolgensma and Spinraza, the treatment cost of rare diseases, such as SMA for infants, is beyond the affordability of most people – whenever these drugs become the only choice to save lives. Thus, the question comes: Is gene therapy commercially viable or sustainable?

Is gene therapy commercially sustainable?

Undoubtedly, the development of gene therapy signifies yet another milestone in medical science to save lives, which is highly commendable. Nevertheless, the question arises, who will be able to afford this treatment? Thus, is development of gene therapy commercially viable and could be a money churner for a company on a long-term basis? There doesn’t appear to be a clear answer to these questions, just as yet. There are several reasons for this apprehension. But, I am citing below just two examples – related to their humongous treatment cost.

According to the article, published in the Scientific American, in the past five years, two gene therapy drugs have been approved in Europe and one in the United States. The name of this article is ‘Gene Therapy Is Now Available, but Who Will Pay for It?’ Interestingly, only three patients have so far been treated commercially with gene therapy, in Europe.

UniQure’s Glybera, used for a very rare blood disorder, costing around USD 1 million per patient, has been used just once since approval in 2012. However, in 2017, due to commercial reason UniQure decided to withdraw Glybera from the market. Similarly, Strimvelisof Orchard Therapeutics – used for severe Combined Immunodeficiency, costing USD 700,000, ‘has seen two sales since its approval in May 2016, with two more patients due to be treated later this year.’ Interestingly, these apprehensions have not deterred many companies. The ball keeps rolling.

But the ball keeps rolling:

That the ball keeps rolling, and at a faster pace, is evident from what US-FDA envisages in this field. According to US-FDA, by 2025, they are likely to approve 10 to 20 cell and gene therapy products a year. This is based on an assessment of the current pipeline and the clinical success rates of these products.

Importantly, despite apprehension of many, even some of the top pharma players, are fast moving into this space – based on their own assessment of the market. But, to move meaningfully in this direction, there are many several critical success factors, most of which are quite challenging and cost-intensive. A few of these, for example, are – a right collaborative model, ability to develop a scalable manufacturing process and overcoming various technical and regulatory challenges on the way. Interested pharma players, apparently, have realized these needs.

Big Pharma players joining ‘Gene Therapy’ bandwagon:

Big Pharma players, such as, Pfizer and Johnson & Johnson (J&J) have started moving into this space. Let me illustrate the point with just a couple of examples.

On March 20, 2019, Pfizer announced: ‘Pfizer has acquired a 15 percent equity interest in Vivet Therapeutics and secured an exclusive option to acquire all outstanding shares.’ Both the companies will collaborate on the development of Vivet’s proprietary treatment for Wilson disease – a rare and progressive genetic disorder, if remains untreated may cause liver (hepatic) disease, central nervous system dysfunction, and death.

Just before this, on January 31, 2019, Janssen Pharmaceutical of Johnson & Johnson (J&J) announced a worldwide collaboration and license agreement with MeiraGTx Holdings plc – a clinical-stage gene therapy company, to develop, manufacture and commercialize its clinical stage inherited retinal disease portfolio, including leading product candidates for achromatopsia. Even prior to this, on January 05, 2018, J&J had announced that the company has established an exclusive research collaboration with the University of Pennsylvania’s ‘Gene Therapy Program’ for fighting Alzheimer’s disease with gene therapy. There are several such instances of gene therapy collaboration for Big Pharma.

With a slightly different collaborative model for gene therapy, on April 12, 2018, GlaxoSmithKline (GSK) signed a strategic agreement to transfer rare disease gene therapy portfolio to Orchard Therapeutics, taking a 19.9 percent stake in the company and a seat on the board. Simultaneously, this agreement strengthens Orchard’s position as a global leader in gene therapy for rare diseases.

What could be the moral dilemma in gene therapy pricing?

The dilemma with gene therapy is that they are frightfully expensive, but at the same time is ‘life-transforming’ for many, across the socioeconomic spectrum. This could be another ‘moral dilemma,’ as such exorbitant, if not seemingly ‘vulgar pricing’, as it were, would raise many questions on the company’s own principles regarding right and wrongin saving lives of patients with its gene therapy.

The reason for this moral dilemma in, especially gene therapy pricing is aptly elucidated in an article titled, ‘How to pay for gene therapies in developing nations,’ published in  Evaluate Vantage on March 22, 2019. Admitting that discrepancies in healthcare between rich and poor nations are nothing new, the article also raises a flag, indicating: ‘The potentially curative nature of many gene therapies heightens the moral conundrum that companies will face if and when these projects get to market.

Acknowledging that gene therapies are hot right now, with their developers taking aim at everything from hemophilia to rare eye diseases prevalent in rich nations,the author raises a pertinent question: ‘With rich countries like the US finding it hard to fund gene therapies, it is worth asking whether these projects will ever reach patients in developing countries. And if they do how will companies cope?’

Intriguingly, to create a larger market some are also targeting disorders, largely seen in poorer areas, such as sickle cell disease that could prove valuable also in the developing world. Expectedly, the pressure will mount from many corners to provide gene therapy at an affordable price. Big pharma players are likely to face this strong head wind, adding further fuel to fire of the moral dilemma of gene therapy pricing, especially for the developing world. As on date, no one knows what percentage of people in the developing world will have access to gene therapy. Even Novartis, reportedly, does not seem to have any plan to make its product available in the developing nations.

Conclusion:

Despite what has happened so far, as described above, looking around, we find a steady flow of gene therapy, some even promise remedial treatment outcomes. Big pharma companies, as well, have commenced a long-haul journey in this direction, with big stake investments.

Regarding, not achieving a huge commercial success with gene therapy, so far, one point is common for all, these are for the treatment of very rare diseases. Probably, because of this reason, some companies, having taken a cue from it, are moving away from ultra-rare diseases. Illustratively, GSK is still looking to use gene therapy in a collaborative platform, to develop treatments for more common diseases, including cancer and beta-thalassemia – another inherited blood disorder – as the above Scientific American article reported.

That said, the point to ponder now, if the effort to come out with a remedial gene therapy for these indications fructifies, would it ensure a long-term commercial viability, alongside giving rise to a moral dilemma on the rationale for gene therapy pricing? This seems to be akin to a ‘chicken and egg’ situation. It will be interesting to witness how it pans out, as we move on.

By: Tapan J. Ray   

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

Paying For The Best Health Outcomes At The Lowest Possible Cost

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“Bayer CEO Dr. Marijn Dekkers is happy to have fair Outcomes-Based Pricing”, reported ‘PharmaTimes’ on December 3, 2014.

Dr. Dekkers was quoted saying, “It is okay to be tested on that in the process of price-setting, that is fine, we should only be paid for the value we bring”. However, at the same time he also reminded, “When we have a new drug that is significantly better than the previous drug but the previous drug just went generic, we are compared to the 20% price, not the 100% price”.

I reckon, the above statement of the Bayer CEO sounds quite amazing, if not bizarre, especially considering the legality in the prevailing global pharma patent regime.  Thus, any discontentment in this area, howsoever intense these are, would unlikely to be able to attract any unbiased favorable ear, across the world.

Another aspect of the aggressive patented drug pricing trend, I deliberated in one of my earlier blog posts titled, “An Aggressive New Drug Pricing Trend: What It Means To India?” of October 27, 2014.

What is it really?

As many would know, another common terminology of Outcome-Based Pricing (OBP) is Value-Based-Pricing (VBP). This approach for pricing is basically intended to offering the best value for the money spent in healthcare. It is ‘the costs and consequences of one treatment compared with the costs and consequences of alternative treatments’. For pharmaceutical players, VBP/OBP would mean not charging more than the actual real value of the product offerings.

As we shall find below, this concept is gaining ground now in the developed markets of the world, prompting the pharmaceutical companies generate requisite ‘health outcomes’ data using similar or equivalent products. Cost of incremental value that a product will deliver is of key significance. Some independent organizations such as, the ‘National Institute for Health and Clinical Excellence (NICE)’in the United Kingdom (UK) has taken a leading role in this area.

An evolving scenario:

It would be worthwhile to note that over a period of time, while pricing new pharma products, manufacturers have been traditionally considering the costs of all inputs of various kinds incurred to bring these drugs into the market and thereafter adding hefty mark-ups on those medicines in a non-transparent manner to arrive at the market price.

This absolutely opaque process of patented drugs pricing is increasingly making the stakeholders, such as patients’ groups, payors, including the governments and insurers much concerned about the differential value offerings of these high priced new drugs over the existing ones for commensurate improvement in the actual health outcomes for the patients.

The relevance:

In the past decade, there has been a clear trend in the price negotiation of new and complex pharma based on health outcomes models as the pharma players are coming under increasing pressure from the payors/patients to improve the treatment cost-effectiveness.

In an article published in the Harvard Business Review of October 2013, Michael Porter and Thomas Lee had cautioned, “ In healthcare, the days of business as usual are over…it is time for a fundamentally new strategy. At its core is maximizing value for patients: that is, achieving the best outcomes at the lowest cost.”

They elucidated the relevance of value based pricing, supporting very strongly the idea of paying for “value” in healthcare.

Thus, if this trend were not checked, the healthcare spending would keep going up, as it is happening today globally, impacting access of these drugs to patients significantly due to spiraling cost pressure.

 A recent vindication:

‘Gallup’ in an articles titled, “Cost Still a Barrier Between Americans and Medical Care” published in December 5, 2014, has reported that in U.S., 33% of Americans have put off medical treatment because of cost. Interestingly, more of them put off treatment for serious conditions than non-serious and more with private insurance had put off treatment in 2014 than 2013.

Thus, to address this issue, as we shall see below, various governments either have or in the process of developing regulatory policies to rationalize new drug prices based on the Outcome/Value-Based Pricing (OBP/VBP) Models of different kinds.

In this backdrop, Bayer CEO’s acceptance of OBP/VBP is indeed a welcoming development. This process is undoubtedly one of the most reasonable ways to arrive at a patented drug price.

For a large majority of stakeholders, treatment outcomes and differential value offerings of new medicines are the most critical factors to monitor the value pathway of patients’ medical care, irrespective of types of illnesses.

The move has already commenced: 

Deloitte Center for Health Solutions in a study on Value-Based Pricing for

Pharmaceuticals, has highlighted that unlike the United States, many countries, where the government plays a decisive role in pricing and price negotiations of pharmaceuticals, have focused on reducing costs through value-based pricing agreements.

The article gives examples of Denmark, where Bayer entered into a “no cure, no pay” initiative on Levitra (vardenafil) for erectile dysfunction in 2005.  Patients not satisfied with the treatment were eligible for a refund. Similarly, in 2007, after the National Institute for Health and Clinical Excellence (NICE) of the United Kingdom (UK) initially concluded that Velcade (bortezomib) was too expensive as compared to its estimated benefits to the population, Johnson & Johnson offered to forgo charges for patients who did not have an adequate medication response.

Further, according to the Burrill Report of October 2013, as part of an effort to regain market share for its statin Zocor, which had been losing ground to then Warner Lambert’s Lipitor, Merck had reportedly offered an out of box proposition to consumers and insurers in 1998. Merck’s “Get to Goal” guarantee offered refunds to any takers who failed to reach target cholesterol levels set by their doctors within six months of using Zocor and adjusting their diet.

Could serve the purpose of global pharma too:

The above Burrill Report also states, “The performance-based pricing also serves a simpler purpose for drug makers. It allows them to provide discounts that may be necessary to establish acceptable value in one market without affecting the price for a drug in other markets around the world as a number of payers peg the price they will pay for a drug to what price a specific country may negotiate with the drug maker.”

Following this trend it appears that like Dr. Dekkers, other head honchos of global pharma majors would ultimately be left with no option but to willy-nilly toe this line in most of the countries across the world for their patented products.

This would be necessitated due to increasing product-pricing pressure based on quantification of differential benefits of the new medicines over already existing ones, as would be reflected in the analysis of intensive cost-effectiveness data.

Defining a measure of cost-effectiveness:

One of the several other methods to measure the cost-effectiveness of a new drug, as reported in a case study published by ‘2020 Public Services Trust at the RSA’, is as under:

“The efficiency of new products can be captured through incremental cost-effectiveness ratios (ICER). These are usually based on quality-adjusted life-years (QALY), which are a measure of how many extra months or years of reasonable quality life a patient might gain as a result of treatment, based on average life expectancy. Life expectancy is usually extrapolated from the results of clinical trials whilst the quality adjustment is based on patients’ experiential response to the level of pain, mobility and general mood which are usually expressed as a weighted utility value of between 0 and 1. The final calculation of the ratio is based on the difference in the cost to QALY ratio between the new drug and the standard available treatment. However, to make sense of the ICERs it has been necessary to establish thresholds beyond which drugs are no longer deemed cost-effective.”

As the above case study highlights, “NICE had established a notional upper limit of £20-30,000 per QALY above which a drug will generally not be recommended, although in exceptional circumstances this can be increased as was the case for beta-interferon, where it was raised to £36,000.”

The Indian perspective:

In developing countries such as India, expenditure towards medicines is considered as an investment made by patients to improve their health and productivity at work. Maximizing benefits from such spending will require avoidance of those medicines, which will not be effective together with the use of lowest cost option with comparable value and ‘health outcomes’.

For this reason, as stated above, many countries have started engaging the regulatory authorities to come out with head to head clinical comparison of similar or equivalent drugs keeping ultimate ‘health outcomes’ of patients in mind.

A day may come in India too, when the regulatory authorities will concentrate on ‘outcomes/value-based’ pricing models, both for patented and high price branded generics, where low priced equivalents are available.

However, at this stage it appears, this would take some more time. Till then for ‘health outcomes’ based medical prescriptions, working out ‘Standard Treatment Guidelines (STG)’, especially for those diseases, which are most prevalent in India, should assume high importance.

Standard Treatment Guidelines (STG):

STG is usually defined as systematically developed statements designed to assist practitioners and patients in making decisions about appropriate cost-effective treatment in specific disease areas.

For each disease area, the treatment should include “the name, dosage form, strength, average dose (pediatric and adult), number of doses per day, and number of days of treatment.” STG also includes specific referral criteria from a lower to a higher level of the diagnostic and treatment requirements.

In India, the medical experts have already developed STGs for some disease areas. However, formulation of STGs covering all major disease areas and, more importantly, their effective implementation would ensure cost-effective healthcare benefits to a vast majority of population.

The Ministry of health of the respective states of India should encourage the medical professionals/institutions to lay more emphasis on ‘health-outcomes/value based’ prescription of medicines, ensuring more cost effective treatment for their patients.

Conclusion:

The medical practitioners in their part should ideally volunteer to avoid prescribing expensive drugs offering no significant improvement in ‘health outcomes’, against the cheaper equivalents. The Government should initially encourage it through ‘self-regulation’ and if it does not work, stringent regulatory measures must be strictly enforced, within a reasonable time frame.

Be that as it may, it clearly emerges today that in the healthcare arena, effective implementation of ‘Outcomes/Value-Based-Pricing-Models’ would ensure paying for the best health outcomes at the lowest possible cost, especially for those who deserve it the most, not just in India, but across the world too.

By: Tapan J. Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.